Egypt’s Ministry of Petroleum and Mineral Resources announced a fuel price increase on April 11, with rates rising between 11.8% and 14.8% across various categories. Diesel and kerosene saw the sharpest hikes, jumping from $0.26 (EGP 13.5) to EGP 15.5 per liter, marking the highest increase among all fuel types.

Other fuel products also experienced price adjustments, with 80-Octane petrol rising from EGP 14.50 to EGP 15.75, while 92-Octane petrol increased from EGP 15.25 to EGP 17.25. The smallest price jump was seen in 95-Octane petrol, which moved from EGP 17 to EGP 19 per liter.

Mazut, a critical fuel for industrial sectors, climbed to EGP 10,500 per ton, up from EGP 9,500. Meanwhile, the price of commercial gas cylinders surged from EGP 300 to EGP 400. The price adjustments reflect ongoing economic shifts, influencing both consumer costs and industrial operations across the country.

Persistent gap between cost and retail price

Despite the recent fuel price hike, Egypt’s Ministry of Petroleum and Mineral Resources highlighted the ongoing gap between the actual cost of petroleum products and their retail prices, largely due to global price pressures. Egypt imports 40% of its diesel, 50% of its butane gas, and 25% of its total fuel needs, leading to EGP 366 million in daily subsidies—nearly EGP 11 billion per month.

Although Brent crude prices have declined, the Ministry noted that the impact has been minimal, reducing diesel costs by just 40 piasters per liter.

In an exclusive interview with Business Monthly, former Minister of Petroleum and Mineral Resources Osama Kamal broke down the financial realities of Egypt’s fuel subsidy challenge. He highlighted the direct correlation between global oil prices and Egypt’s subsidy expenditures, stating, “Every $1 rise in oil barrel prices raises EGP 10 billion in aid and every $1 decline in the price of the oil barrel decreases aid by EGP 10 billion, However, we do not benefit from the decrease due to the sheer size of the subsidy figure.”

Kamal detailed Egypt’s diesel consumption, revealing that the country pumps around 50 million liters daily, with production costs exceeding EGP 35 per liter. This means the government effectively subsidizes each liter by approximately EGP 15, amounting to EGP 750 million in daily diesel subsidies.

Discussing gas cylinders, Kamal explained, “The cost of the gas cylinder is $8, which translates to EGP 400, and was sold for EGP 150. We pump between one million and 1.2 million gas cylinders daily, which adds up to EGP 250 million.”

With butane and diesel subsidies nearing EGP 1 billion per day apart from the other products, Kamal emphasized the immense fiscal burden these policies place on the Egyptian economy.

Electricity: A major fiscal drain

Kamal shed light on the electricity sector’s significant consumption patterns, revealing that it utilizes approximately four billion square feet of gas, purchased at $3.25, despite its actual cost being closer to $7.50. Additionally, the power sector consumes 13,000 tons of mazut daily, which the government buys at EGP 4,800 per ton, far below its true cost of approximately $300 per ton.

These figures culminate in a staggering monthly electricity cost of EGP 30 billion, of which only EGP 10 billion is recovered.

Exploring alternative energy, EV adoption

Kamal advocated for a shift toward cleaner and more cost-efficient energy solutions, emphasizing the benefits of natural gas-powered vehicles. “In the case of using gasoline or diesel, the citizen pays 350 pounds, and an additional 300 pounds are paid as a subsidy. But if the car runs on natural gas, the citizen will pay between 140 to 150 pounds, the state won’t have to pay any subsidy, and the citizen will save around 200 pounds,” he explained. However, the upfront cost of converting vehicles to run on natural gas—estimated at $1,000 to $2,000—remains a significant barrier.

He highlighted that taxi and microbus drivers are the largest consumers of subsidized fuel, receiving daily subsidies of around EGP 24,000 per vehicle, amounting to EGP 750 million per month. Kamal also proposed alternatives such as solar and wind power, noting that developers could be granted free land in exchange for 20% to 30% free production power.

Electric vehicles (EVs) were another key part of his vision. “The [electric] car will consume a value of EGP 75 against EGP 150 for gas and around EGP 600 in benzine or diesel,” he said, suggesting that lifting customs duties on EVs for three to five years could accelerate adoption.

Kamal stressed the need for an integrated energy solution, including a rooftop solar initiative for government buildings and schools, which he believes could reduce electricity usage by at least 25%. “The point is the solution for the energy problem is supposed to be an integrated solution,” he remarked, adding that 60% or more of consumption is tied to electricity, malls, and household use.

On a broader note, Kamal underscored the importance of petrochemicals as a strategic use of Egypt’s energy resources, citing examples like Singapore and Malaysia, which have successfully transformed their economies by prioritizing petrochemical industries.

Reform and IMF oversight

The latest assessment from the International Monetary Fund (IMF) underscores the complexity of Egypt’s ongoing energy and fiscal reforms. In a March 11 statement, Nigel Clarke, Deputy Managing Director of the IMF, emphasized the social costs associated with adjustments to energy prices, subsidies, and tax policy, warning that these must be carefully managed. He also highlighted concerns over the state’s extended role in non-strategic sectors, cautioning that limited efforts to enhance market competition could pose challenges to Egypt’s medium-term growth.

Despite these concerns, Egypt recently completed the fourth review under the IMF’s Extended Fund Facility, securing access to a $1.2 billion loan tranche. This milestone reflects the country’s continued engagement with the IMF, as it navigates economic restructuring while maintaining stability in key sectors.

Geopolitical and economic uncertainties, along with fluctuations in production and logistics costs, are expected to shape fuel pricing in the coming months. The last price revision took place on October 18, 2024, with the next review scheduled in six months, signaling further potential adjustments.